Economic Vigor Boils Down To Productivity

OPINION

There is something troubling about the idea that the huge growth of business productivity portends our economic ruin.

The wrongheaded notion making the rounds is that the improving economy will lead to worse times because companies are making money with fewer workers.

Actually, increased productivity means a more globally competitive U.S. economy, which should lead to more jobs.

But, if you don't like the lack of a guarantee, here's a sure thing:

If American firms are not productive, there'll be a lot more joblessness.

Let's be clear. I am not blaming U.S. workers. The featherbedding days are gone. The problem is cheap foreign labor.

It may not be fair to U.S. workers, but that doesn't matter. Consumers buy the best, least-expensive products. That is the given.

Closing U.S. borders to cheaper, foreign-made goods is a non-starter. Such a policy helped lead to the Great Depression.

U.S. products must be competitively priced, or more valuable, to buyers. Higher productivity is the only way to dent the cost advantage of cheap labor.

Productivity is the measurement of output per worker. The more workers produce, the cheaper products will be. On a macro scale, that means when the economy is productive, U.S. goods and services are more competitive because they cost less per unit.

Part of the doom-saying reflects the political cycle, and the inevitable tendency by those not in power to see the glass as half-empty and its contents as evaporating.

Part stems from an admirable, yet naive, worry that woe is us because America has not yet reached full employment. That has occurred rarely, most recently in the last part of the 1990s, when the conditions that led to that job market, not coincidentally, created the bubble that caused the downturn from which we are emerging.

Full employment is good in theory, sometimes in practice.

Productivity is a better thing.

The Soviet Union, in its heyday, had full employment, lousy productivity and dismal living standards.

This is not to underestimate the hardship of unemployment. In a capitalist society, one's existence, and often one's emotional and mental health, is dependent on one's job.

Yet an unpleasant fact of economic life is that what benefits people isn't always good for the overall economy.

Capitalism often provides profit incentives that hurt human beings. But the alternative is a socialistic safety-net-oriented society that produces lower living standards.

I'm not suggesting public policy ignore joblessness. It is a horror for workers. But depending on what happens afterward, it is not necessarily so for society, or the worker in the longer term.

An economy's test is providing the incentives for someone to make a better widget and employ that displaced worker.

Teeth gnashing can't save jobs that aren't efficient in a global economy, nor would government interference.

Mandates that would limit business profits to protect workers would only increase costs and make U.S. products less competitive.

Therefore the relative attention given to December's economic figures is so puzzling.

The jobless rate dropped again, to 5.9 percent, which is low by most historical comparisons but still higher than three years ago. Given shorter shrift was that productivity grew at 9.2 percent, the highest rate in 20 years.

Now, there are those who argue that history doesn't apply, that productivity won't lead to the same kinds of employment gains that typically occur during recoveries.

They may be right. I hope not.

But even if they are correct, there is no better course. Lowering productivity by hiring more workers to reduce the jobless rate would be stupid. That would just increase the cost of products, making them uncompetitive.

That's a simple fact of life.

Instinctively, people seek the most and best they can afford.

The Los Angeles Times recently did a superb series of articles on Wal-Mart. The series' key point was that even those who understand their relatively higher-paying jobs with less competitive retailers are threatened by Wal-Mart's success shop there, too. They can't resist the prices, which are linked to the firm's relatively low wage scale.

The U.S. economy can do many things, but it can't fight the bargain-hunting gene. Only productivity can help retain Americans' high standard of living in a Wal-Mart world.